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Arris Group Inc. (NASDAQ:ARRS)

Q4 2012 Earnings Conference Call

February 5, 2013 5:00 p.m. ET

Executives

Robert Puccini – Vice President, Investor Relations

Robert J. Stanzione – Chairman and CEO

David B. Potts – EVP and CFO

Bruce McClelland – Group President

Analysts

Simon Leopold - Raymond James & Associates

James Kisner - Jefferies & Company

Jim Hillier – UBS

Mark Sue – RBC Capital Markets

Greg Mesniaeff – Maxim Group

Operator

Good day ladies and gentlemen and welcome to the Quarter Four 2012 Arris Group Inc. Earnings Conference Call. My name is Patrick and I will be your coordinator for today’s call. At this time all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Mr. Bob Puccini of Investor Relations. Please proceed, sir.

Robert Puccini

Thank you, Patrick and welcome to the Arris conference call with management. This afternoon, we will be discussing our fourth quarter and full year 2012 financial results, which were released after close of markets today. As usual, we will be using a series of slides during our webcast, which are also posted on the Arris website in the Investor Relations section.

With us here at Arris headquarters are Bob Stanzione, Arris' Chairman and CEO; David Potts, Executive Vice President and Chief Financial Officer; and Bruce McClelland, Group President. There will be a replay of this entire call available several hours after the conclusion of the call and a replay of the call and the slides will be available on our corporate website for the next 12 months.

Before we begin, please go to Chart 2. During this call, we may be making forward-looking statements, including our outlook and expectations for our industry in general, estimated revenue and earnings for the fourth quarter 2012, certain financial operating metrics, the timing and introduction of new products and technologies, anticipated spending patterns by some of our customers and expected sales levels of various product categories. It is important to know that actual results may differ materially from those suggested by any forward-looking statements, which may be made during today's call. For further information in this regard and for specific examples of risks that could cause actual results to differ materially from these forward-looking statements, please see our recent filings with the SEC.

Now, if we would go on to Chart 3, Bob and Dave will provide their comments on quarter results, after which we’ll open up for questions. Over to you Bob.

Robert Stanzione

Thanks, Bob and good afternoon everyone. Let’s turn to Chart 4. So before I begin commenting on the Q4 results, I’d like to say a few things about the full year of 2012.

It was by many measures one of the best, if not the best year in our history. We grew sales in 2012 by 24% and non-GAAP earnings per share by 15%. We continued our share buybacks until late in the year when we became involved in the Motorola Home transaction. And most importantly, we increased our investments in product development and introduced an unprecedented number of new products and features. We launched a radically new cable Edge Router platform. We expanded our video gateway portfolio, including the Comcast RDK that was announced at CES and we grew our Wi-Fi business (inaudible) both home (inaudible) and of course we capped off the year with the announcement of our agreement to acquire Motorola Home Division which will be a giant leap forward for our business. We’re very proud of the 2012 accomplishments and we look forward to an even better 2013.

Now moving on to the Q4 results on Chart 5. With a couple of small exceptions, the December quarter turned out about as we expected, with solid results and a favorable mix of products, including strong CMTS shipments. Revenues were down about 4% quarter-over-quarter at $344 million. However, compared with the fourth quarter of 2011, sales were up 22%. Gross margin was 35.8% and non-GAAP earnings per share was at the center of the guidance at $0.28, up 33% from a year ago and that’s in spite of the effect of the R&D tax credits which we cannot reflect in the 2012 results.

Our customer mix shifted slightly during the quarter as U.S sales decreased while international sales with a strong showing in Canada were up, resulting in a 74% domestic and 26% international revenue split. I’m also very encouraged by the strong Q4 bookings and by the increase in backlog which gave us good momentum going into January.

Onto Chart 6 for BCS. BCS revenues of $273 million were down 3.8% sequentially. However, margins increased substantially to 36.1%, reflecting favorable mix shifting towards CMTS purchases and continued cost reduction activity in the CPE category. CMTS downstream port shipments jumped to 105,000 and we also saw a very strong demand for upstream ports in the quarter. Shipments of CPE devices were down from the record in the third quarter, but remained very strong with almost 2.3 million units shipped 87% of the shipments were DOCSIS 3.0 capable and we continued to see more demand for higher value Wi-Fi enabled devices.

We continued to make progress on the expansion of our video gateway product line. We know have Moxi Gateways and commercial deployment in 10 customers and see steady increases in the deployment rates. We also reached a key milestone in the quarter with Comcast in our RDK Gateway program with our product being demonstrated by Comcast at last month’s Consumer Electronics Show.

And the number of E6000 lap and field trials expanded in the quarter and we’ve started to ramp up production expecting healthy demand for this new Cable Edge Router platform early this year. We now have live traffic running on the E6000 and we expect to score our first revenues in this quarter.

So let’s go to Chart 7. ATS sales were up year-over-year, but down slightly in the quarter, primarily due to a drop-off in the supplies category. Profitability continued to improve and recent wins at several accounts signal continued improvement in 2013. I’m pleased with the steady progress in this business. Despite the weak housing market, growth is being driven by across the board domestic strength, new international customers and an expanding professional services business. As you may recall, we sold our small electronic connector business back in March and since then we’ve continued to prune low volume, low margin SKU’s from the supplies category.

MCS. Revenues declined slightly in the quarter, primarily due to weak demand for legacy VOD systems. However, once again we saw continued expansion of our Assurance software customer footprint and ad insertion was a bright spot, with gains in market share with tier-1 North American MSO’s.

Turn to Chart 8 please for guidance. As you’ve seen, our Q1 2013 revenue guidance is centered on about 19% year-over-year growth. This puts us in good position to achieve the 10% year-over-year growth target that we spoke about last year. Our non-GAAP earnings guidance centers on about 26% year-over-year improvement and it’s worth noting that we expect mix to shift back toward more CPE sales, similar to the mix that we had in the third quarter of last year.

Now to Chart 9 for an update on the status of the Motorola acquisition. Much progress has been made over the past weeks. We’ve received the debt ratings that we had anticipated and the financing commitments are nearly finalized. Integration teams are working their way on transition plans. The new regular – the required regulatory filings are complete and Hart-Scott-Rodino review is under way. We still anticipate the closing can occur in Q2, but we are now in that awkward period as we await DOJ approval.

To Chart 10. As I said in December, this is a giant leap forward in the Arris strategy. The combination will more than triple the size of the company. We will have a much more diversified customer mix with more than a third of revenues coming from international markets. And we’ve more than doubled our intellectual property portfolio.

Chart 11. This is a compelling combination of two well established players in the broadband industry, both with profitable track records. We operate in an industry with strong, well established customers who have been very supportive of the transaction. This combination will give us the scale to accelerate our speed to market with the technological innovations that our customers need to meet the ever increasing demands of their subscribers. Most importantly, it will generate significant earnings accretion and shareholder value.

And with that, thank you and over to Dave.

David Potts

Thanks Bob and thanks everyone for joining us this afternoon and I’m very pleased to report on a very strong 2012. Let’s get into some of the detail starting with the financial highlights in Chart 13 please. Our sales were $344 million in the fourth quarter and compared to $281.1 million in the fourth quarter last year, $357.4 million in the third quarter of 2012 and full year sales were $1.354 billion versus $1.089 billion in 2011. So year-over-year, our sales were up about 24% and I’ll break down the segment information in just a moment.

Gross margin was 35.8% in the fourth quarter in comparison to 37.9% in the fourth quarter last year and 31.3% in the third quarter of 2012. And our adjusted non-GAAP EPS was $0.28 in the fourth quarter, which compares to $0.21 in the fourth quarter of 2011 and $0.22 in the third quarter of 2012.

Our forth quarter 2012 GAAP income per share was $0.13 per share which compares to a GAAP loss per share of 51% in the fourth quarter of last year and $0.15 per share in the third quarter of 2012. And as always, a reconciliation of our GAAP to non-GAAP earnings is attached to the press release and can also be found in our website.

One comment on taxes. Our GAAP and non-GAAP results exclude the benefit of approximately $5 million or $0.04 per share related to R&D credits. As you probably know, congress passed legislation for 2012 retroactively and early 2013. As a result, the benefit will be recorded in 2013, not 2012 in our GAAP results. However, this benefit will not show up in our 2013 non-GAAP results, but we will of course receive the cash benefit when we file our tax returns this year.

Cash short term and long term marketable securities were approximately $584 million at the end of the fourth quarter and we generated approximately $12 million of cash from operating activities in the quarter. I will also highlight, in 2012 we re-purchased 4.5 million shares for about $52 million and I’ll touch a little bit more on the balance sheet and cash in just a few minutes. With respect to orders, our order backlog was $222.6 million at the end of the fourth quarter and our book-to-bill ratio was 1.11 for the quarter.

Okay, let’s turn to Chart 14 and look at some of the sales highlights. First, let’s focus on the sales by segment bar chart for the fourth quarter, comparing our reported sales by segment. PCS sales were $272.7 million in the fourth quarter and compared to $211.9 million in the fourth quarter of 2011 and $283.5 million in the third quarter of 2012. With respect to the year over year comparison, the increase is primarily attributable to high demand for our DOCSIS 3.0 CPE equipment and is in part due to the inclusion of sales associated with our Q4 2011 acquisition of BigBand.

ATS sales in Q4 were $54.6 million and compared to $51 million in the fourth quarter of 2011 and $56.7 million last quarter. MCS sales were $16.7 million in Q4 as compared to $18.1 million in the same period last year and $17.3 million in the third quarter 2012.

The geographic split, international sales were $87.9 million, up from both the fourth quarter of last year and the third quarter of 2012 and sales to Time Warner were $52 million and sales to Comcast were $126 million in the fourth quarter.

All right, let’s turn to chart 15 and look at gross margin. For the quarter, our overall gross margin was 35.8%, which compares to 37.9% in the fourth quarter of 2011 and 31.3% in the third quarter of 2012. The fluctuation reflects a s shift in product mix. Our gross margin percent for BCS was 36.1% in the fourth quarter of 2012, which compares to 38.3% in the fourth quarter last year and 31.4% in the third quarter of 2012. We had a higher mix of CMTS seals in the fourth quarter of 2012 as compared to Q3 2012.

The gross margin percent of our ATS segment was 24.9% and compares to 25.9% in the fourth quarter of last year and 21% in the third quarter of 2012. The gross margin percent for MCS was 66.1% in the quarter and compares to 67% in the fourth quarter of 2011 and 63.6% in the fourth quarter 2012.

Operating expenses on Chart 16. Total R&D and SG&A was $84.5 million in the fourth quarter, up from $78.6 million in the fourth quarter of 2011 and $80.9 million in the third quarter of 2012. But please not that $3.1 million of expense related to an early pension payout program was included in SG&A in the fourth quarter 2012. And we’ve adjusted for this in our non-GAAP results.

Year-over-year, the increase in operating expense is primarily due to the BigBand acquisition. The fourth quarter of 2012 we incurred further restructuring costs of $300,000 and we incurred about $5.1 million of acquisition costs related to the Motorola Home acquisition in the fourth quarter of 2012.

All right, let’s move to Chart 17 and look at the balance sheet and cash flow. We ended the quarter with $5784million of cash, short term and long term marketable securities, as compared to $561 million at the end of the fourth quarter 2011, and $571 million at the end of the third quarter 2012.And year-to-date, we’ve repurchased 4.5 million for about $52 million.

Some other things to note. We generated approximately $12 million of cash from operating activities in Q4. The elements of earnings which are cash based were approximately $36 million and we used about $24 million of cash for working capital. In particular we have higher recounts receivable as a result of the timing of the sales from the quarter and we had higher variable compensation payouts in the quarter.

CapEx was approximately $7 million in the quarter, which is in line with our plans. So our balance sheet position is very strong, with a net cash position, including short term and long term investments, of approximately $352 million. The net position includes $232 million of 2% convertible notes which are due late in 2013.

Okay, let's talk about guidance in Chart 18 please. At this point, for the first 2013, we estimate that non-GAAP sales will be in a range of $350 million to $370 million and GAAP sales will be in the range of $337 million to $357 million. We expect non-GAAP EPS to be in the range of $0.22 to $0.26 per diluted share and GAAP EPS will be in the range of $0.02 to $0.06 per diluted share.

A few things for to note. First, as Bob just mentioned, we expect the mix of products to be more weighted to CPE in Q1 2013 versus the fourth quarter of 2012. And we are incurring expenses associated with the Motorola Home acquisition and we’re adjusting for those in our non-GAAP earnings.

The next one is a bit out of the ordinary and is certainly a new one to us. The planned investment by Comcast as a result of the Motorola Home acquisition will result in a $13 million non-cash accounting impact on Q1 revenue and the margin. Here’s how it works. The acquisition provided Comcast the opportunity to invest in Arris alongside of Google at $14.11 per share, which was based upon the market price when the deal was signed. However, since the Comcast commitment did not occur until January the 11th when the stock price was $15.35, the accounting guidance requires that we record the implied fair value of that benefit received by Comcast as a reduction in revenue and that value again is approximately $13 million. Until closing, we’ll have to continue to mark-to-market any change in that value and that change in value will flow through other income expense and we’ll adjust for all of these impacts in our GAAP to non-GAAP reconciliations.

For completion, we’re anticipating a diluted share account of approximately $118 million and we’re assuming a tax rate of about 32% which includes the current year benefit of R&D tax credits, but excludes the benefit of the catch up of the 2012 R&D tax credits. And as always, a reconciliation of our GAAP to non-GAAP sales and EPS guidance can be found on chart 19. It’s also attached to the press release and is on our website and we’ve included a reconciliation of our GAAP to non-GAAP earnings per share on Chart 20 and it can also be found on our website.

So with that, thank you very much and let me turn it back to Bob.

Robert Stanzione

Thanks Dave. With that, we’d like to open the lines up for questions. Patrick, would you come back on please and let everybody know how to ask their questions?

Question-and-Answer Session

Operator

(Operator instructions). And gentlemen, your first question comes from the line of Simon Leopold with Raymond James. Please proceed.

Simon Leopold - Raymond James & Associates

Just a quick housekeeping question. The 19% year-over-year revenue growth, that’s referring to your non-GAAP revenue guidance, correct?

Robert Stanzione

Correct.

David Potts

Certainly when we look at the guidance difference.

Simon Leopold - Raymond James & Associates

Okay. So the GAAP guidance is purely from the adjustment for the stock price?

David Potts

Yeah and again it’s kind of -- frankly I’ve never run into this one before, Simon but as we talked to EY and others that we have to indeed adjust our revenues for that. So we thought it would be good to put it out there so it’s understood. But obviously the cash transaction cycles of our sales are identical to history if you like.

Simon Leopold - Raymond James & Associates

And I guess I wanted to ask about the Motorola acquisition. Now when Google announced their results recently, the disclosure for the Motorola Home business came in a little bit below what some of us were expecting. Specifically, the operating margins came in below their 9% run rate from the last few quarters. Has anything in the business changed materially since you’ve announced the deal? Or is there anything there specifically that resulted in that or maybe you guys can…?

Robert Stanzione

I don’t think so. They actually put it into discontinued office and the disclosure was actually less robust. But frankly the sales were just a bit better than we were thinking there in the fourth quarter.

Simon Leopold - Raymond James & Associates

But the operating profit, was that brought in to you or…?

Robert Stanzione

No and in fact – again how they’ve done in this cost it’s really difficult to break it apart, but no, from what we see from the results is what we were expecting.

Simon Leopold - Raymond James & Associates

Okay. Going on that question, the business mix for you guys is going to change pretty materially after the deal closes. Maybe 40% of your revenue now coming from set top boxes. So if we consider the puts and takes of digital set tops declining and hybrid boxes and gateways growing, do we end up with a segment of the industry that’s a core piece of your business now that’s growing modestly or a little better? If not, how are you envisioning this trend going forward, I guess?

Robert Stanzione

I’ll let Bruce comment more, but of course there’s more than just the traditional cable set top boxes that (inaudible) sold.

Bruce McClelland

Yeah. I mean they have – I think as we went through on the announcement, a variety of products, including the networking business, video processing equipment and what not, so it will be a blend of all of that when we’re done.

Simon Leopold - Raymond James & Associates

And how should we think about the platforms I guess for each business and how they’ll be incorporated going forward? I guess Arris (inaudible).

Robert Stanzione

We’re really not ready to announce how we’re going to integrate. There’s certainly a lot of planning and discussion going on and we’ll be announcing that as soon as we are given clearance to.

Operator

Your next question comes from the line of James Kisner with Jefferies & Company. Please proceed.

James Kisner - Jefferies & Company

First, your – just wanted to verify after the close of this Comcast equity issuance and Google equity issuance, that there is no impact from related party transactions or anything like that. It's just you will have a normal revenue stream after that aspect closes. Is that right?

David Potts

That’s right and really what happened with the Comcast investment was purely timing. It was just a matter of getting that paper closed along with the other transaction. But it’s business as usual. They have no forward feeder influence of any nature.

James Kisner - Jefferies & Company

Okay, perfect. So what about – can you break out percent of Wi-Fi this quarter? Would you mind providing that again?

Robert Stanzione

I don’t have that off the top of my head. We can look it up here as we go along, James.

James Kisner - Jefferies & Company

Okay, perfect. And it looks to me like R&D came in pretty light sequentially. Is that a one-quarter anomaly? What do you think about R&D expenses or even OpEx generally in 2013 given your growth? I think you in the past have said you expected OpEx to grow more slowly, but how should we think about that?

David Potts

Well, what I said (inaudible). So in the quarter, remember part of what we had in the OpEx and this is GAAP OpEx which includes stock comp, let’s make sure everybody is grounded on that again, was $84 million to $85 million which included $3 million of this yearly payout program we have with some of the pension benefits. And by the way, why we did that is to reduce the risk coming after us we have and – can simplify what’s left of our pension program. So that was – let’s say it’s maybe 80 or 81. I think in August I said we’re probably shooting for a target or around $85 million. It sounds like we’re in good stead to do that or less. So I stand behind what we were talking about in August when were together last.

Robert Stanzione

And I’ll just add to that. We had in our plan for 2012 to increase R&D and we did over 2011. We increased it about 16.5% and our plan as we told you before, we plan to flatten that out somewhat going forward. Of course the acquisition of Motorola changes that quite a bit and it will have quite a different profile when we get done.

James Kisner - Jefferies & Company

Great and just one last one, sneak in there. E6000, you said you are expecting revenue in this coming quarter. I’m assuming that’s pretty modest, below $5 million kind of number. Should I expect more than that?

Robert Stanzione

It’s pretty modest. I won’t give you a number, but it’s pretty modest.

James Kisner – Jefferies & Company

Okay. Thanks a lot guys. I'll pass it. Thank you.

Bruce McClelland

And James on your other question about half, little less than half is shipment for Wi-Fi enabled, just under half of the CPE shipments.

Operator

Your next question comes from the line of Amitabh Passi of UBS. Please proceed.

Jim Hillier – UBS

This is actually Jim Hillier for Amitabh. He was on the line. Looks like he may have had to drop off. But I guess, first, if you wouldn't mind discussing your expectations for the CPE CMTS mixes for the rest of the year. Seems like CMTS strength in the fourth quarter, a little bit more CPE strength in the first quarter. Do you think that CPE could further strengthen as you progress through the year?

Robert Stanzione

Yeah, I think all product lines are going to strengthen as we get through the year. The mix will probably shift back and forth a little bit as it has historically. As you just look back a couple of quarters you saw big mix of CPE in the third quarter and then CMTS came back strong in the fourth quarter. This quarter we expect CPE to grow over what we did in the fourth quarter and CMTS to remain a little bit subdued, but then grow as the year goes on. And of course we’re launching this E6000 platform right now and the demand for that appears to be pretty darn health. So we’re looking forward to a good year in that category.

Jim Hillier – UBS

Got it. And then in terms of your outlook for spending this year, can you give us any insights into what your customers are telling you about spending plans and also if you see the potential for any disruptions this year with the recent Liberty Global, Virgin Media deal.

Robert Stanzione

I don’t see any disruptions with the Liberty and Virgin Media deal. I think that’s neutral toward our business. They’re going to have to both continue to run their businesses and please their subscribers. So I don’t see them changing their spending plans very much. And in general, we’re seeing what we think may be a low single digit growth in cable CapEx. Nevertheless we think we’re going to grow faster than that.

Operator

Your next question comes from the line of Mark Sue with RBC Capital Markets. Please proceed.

Mark Sue – RBC Capital Markets

Gentlemen, if you can help us recalibrate the relative contributions from all the new products this year and how it might differ from your assumptions last year. And I ask because we’re starting to see a housing recovery, the CAPEX priorities are shifting a little bit. So maybe in terms of where you might see the rank order, for example, the E6000, wireless gateway, Moxi Gateway, how we should think about the relative strength this year as we progress through 2013.

Robert Stanzione

I don’t think that we’re going to see a big difference. We should see some lift as a result of that, with one exception. I’d say the ATS business should see a little more of a lift as a result of the housing recovery if we’re in one. You want to answer that?

David Potts

I think the lift in ATS that was probably more related to the bandwidth expansion and some of the aging plants and the reinvestment in that infrastructure more so than housing stats per se. the housing stats obviously help a little bit. But what we are seeing is a need to do more note splits and add more capacity to keep up with the additional broadband capacity that’s required, more HD channels, et cetera. So we do think there’s an increased spend in that category. We certainly see strong demand for the DOCSIS 3.0 Wi-Fi customer premise equipment continuing on this year. There’s just no line of site to decline in that at all. So that looks very robust for the year.

Mark Sue – RBC Capital Markets

Got it. And then maybe on a regional basis, should we see -- there were some lumpy trends in Latin America last year. Are we now at a point where it’s upward and forward there? And also just your thoughts on Europe now that the macro seems to have shown some stabilization there, how we should see the outlook there this year?

Robert Stanzione

Certainly in South America we see continued strength and the growth in new housing, new subscribers is stronger there. Brazil is a great example I always talk about where they’re building out a considerable new plant and adding new subscribers. A very competitive environment so a lot of investment there. Europe from a cable perspective didn’t diminish dramatically last year. It was just a solid year. We are hoping that the spend picks up a little bit this year as the overall economy stabilize a little bit more. But in general cable didn’t too back in Europe last year.

Mark Sue – RBC Capital Markets

That's helpful. Lastly, gentlemen, on Comcast. Comcast as a customer and also Comcast as a shareholder, recognizing that the sub segmentation from the customer side and the investment decision, wouldn't it still help you from a market share point of view against your competitors (inaudible) this important company becomes more intertwined with your [phase]?

Robert Stanzione

I think the Comcast investment – first of all I don’t think it’s going to sway their purchasing decisions one bit. Both Motorola and Arris are key suppliers of Comcast, but they have a multi-supplier policy and I think they’ll stick to it. The investment I think was – you could think of that as not only an endorsement for this, but they were interested in the Motorola Home business winding up in a good place and their investment was aligned with that motive. I don’t think there’s anything more to it than that.

Operator

(Operator instructions).Your next question comes from the line of Greg Mesniaeff of Maxim Group. Please proceed.

Greg Mesniaeff – Maxim Group

Thank you. Looking at the results, domestic sales were kind of down, I guess you can say, but yet you mentioned that ad insertion was a bright spot with some market share gains to report. Can you give us a little more color as to what you saw in the domestic MSO market in the fourth quarter? I mean obviously Comcast was a major customer, but more specifically in the ad insertion sub-segment and the fact that you said you gained some share.

Robert Stanzione

So you know that the fourth quarter is probably the most unpredictable quarter of the year. It’s sometimes up, sometimes down. This year it was a little bit down, although it was way up from what it was a year ago. We saw spending at Comcast rise fairly substantially at the end of the year. We saw spending from Time Warner taper off fairly substantially at the end of the year. Time Warner was more affected by the superstorm that occurred back in, what was it, October/November timeframe and a lot of their facilities in the northeast were damaged by that and I think that resulted in their pulling back a little bit on bar kinds of CapEx, the kind of CapEx they would spend in an account like ours. The ad insertion piece, Greg is such a small thing. It really doesn’t move the needle that much. MCS in general is the smallest of our categories by far and so the ad insertion wins are nice. They’re high margin wins. Advertising is an area that we think is exposed to rapid technological change and therefore potential growth for us. So it’s one that we’re very interested in and that’s why we comment on it.

Operator

At this time there are no additional questions. You may proceed.

Robert Puccini

Thanks Patrick. This is a quick reminder. Any information that we’ve put out on the Motorola Home acquisition you can find on our website in the Investor Relations section and Bob, any final words?

Robert Stanzione

Just a couple. One is that once again I’m very proud of the work that the men and women of Arris have done during 2012 growing topline, growing bottom line, investing more in the future than we ever have before and I think we’re really teed up for an outstanding 2013 and of course we’re looking forward to getting this transaction underway so that we can do even better as the year goes on. So thank you all for tuning in and with that, we’ll sign off.

Robert Puccini

Thanks everyone. Thanks Patrick.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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